Jack in the Box: A novel idea that changed how Americans eat

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Satisfying the needs of a rising car culture that demanded convenience, San Diego businessman and restaurateur Robert Oscar Peterson opened his first drive-thru Jack in the Box in 1951. Located at the corner of 63rd Street and El Cajon Boulevard, it was the first restaurant to use new two-way intercom technology. A giant jack-in-the-box took customers’ orders through a speaker box, and about three minutes later, they could pick up their 22-cent hamburgers at the drive-thru window. Perhaps not coincidentally, 1951 was the first year the term “fast food” appeared in the Merriam-Webster Dictionary.

In 1960, the company opened its first restaurant outside California in Phoenix. Management sought to expand further east by opening 450 to 500 restaurants during the 1970s, more than tripling the number of locations. But by 1979, the chain was struggling to distinguish itself from competitors, chiefly McDonald’s (NYSE:MCD). Halting its expansion, it sold or closed more than 200 restaurants throughout the East Coast and Midwest.

To turn around the company, management announced a major shift in marketing strategy when it literally blew up its jack-in-the-box clown in a 1980 television commercial. The symbolic gesture signaled that the company would no longer compete for McDonalds’s target market of families with children. Instead, it began marketing to older, more affluent customers by offering an upscale menu including salads and sandwiches.

A Jack in the Box restaurant in the 1970s. Note the sign posting the price for a fish sandwich at 42 cents. Today, the same menu item ranges between $1.49 to $1.79. Photo courtesy of Jack in the Box

Although it still calls itself a hamburger chain, expanding its menu in the 1980s distinguished Jack in the Box from its competitors at a time when most fast-food chains offered standard fare. The chain has been selling tacos for more than 60 years. It was the first fast-food chain to offer a breakfast sandwich and portable salad, now standard items on most fast-food menus. The strategy to diversify its menu increased annual sales throughout the ‘80s and continues today with premium products like the sirloin burger and spicy chicken sandwich offered alongside curly fries, egg rolls, and seasonal or regional items. New products are introduced several times a year, according to company spokesman Brian Luscomb.

Jack in the Box has been headquartered in Kearny Mesa since 1963. In 2004, an innovation center, research and development labs and test kitchens were built next door. Periodically employees participate in sensory panels to test new or existing products with different ingredients.

"We do a lot of research,” Luscomb said. “We look at what’s trending in other segments of the fast casual and casual segments, and work on delivering those products and that quality in a quick-serve environment.”

Rebounding and rebranding

In January 1993, the company suffered a major blow when an E. coli outbreak was linked to tainted, undercooked hamburgers sold at Jack in the Box restaurants in Washington, Idaho, California and Nevada. In response, it suspended hamburger sales, recalled meat from distributors, increased cooking times and temperatures, and pledged to pay all related medical costs. By the end of February 1993, more than 600 people had been affected, 169 had been hospitalized and four children were dead. Amidst slumping sales, the company faced hundreds of lawsuits from sick customers, its shareholders and franchisees. In 1994, it instituted the fast-food industry’s first comprehensive food-safety program. Today, it is considered the fast-food industry’s leader in food safety.

The company’s Innovation Center in Kearny Mesa. The 70,000-square-foot facility has kitchens, labs and research rooms where new menu items and products are developed and tested. Photo courtesy of Jack in the Box

An aggressive effort to revamp its tarnished image was launched in 1995 when, through the miracle of plastic surgery, the company resurrected its former mascot in a savvy “Jack’s Back” advertising campaign featuring Jack as a blue-suited fictional founder, CEO and spokesman. Now in its 17th year, the longest, ongoing advertising campaign in fast-food industry has received numerous awards, including several Clios and EFFIEs, which judge the effectiveness of advertising to drive sales. Jack has achieved cult status, appeared in more than 2,200 television ads, and in 1996 ran for President, beating Bill Clinton in a Virtual Vote poll. The self-proclaimed ruler of the fast-food world oversees a “sales” force of some 22 million antennae balls sporting his own likeness, and has around 31,000 Twitter followers.

In 1996, the company achieved a $20 million profit and sales improved. Returning to growth mode, it opened 75 new restaurants and put the E. coli crisis behind it in early 1998, when it received a $58 million settlement from Vons Companies Inc., its meat processor and supplier prior to the outbreak.

In 2003, Jack in the Box acquired Qdoba Mexican Grill, a fast-casual chain. The wholly owned subsidiary now has more than 600 restaurants in 42 states and the District of Columbia.

In 2005, about 75 percent of Jack in the Box restaurants were company-owned. That year, it began transforming its business model to a primarily franchise system. According to Luscomb, as of July 8, 2012 — the end of the company’s third quarter — it had reduced its percentage of company-owned locations to less than 26 percent (586 of its 2,247 locations) largely through the sales of restaurants to franchisees.

Luscomb said the strategy is lowering the company’s cost structure and generating higher royalty and rental income streams. The chain is targeting 2 to 3 percent annual growth and expanding into new markets. In September, it opened its first restaurant in Cincinnati and now has restaurants in 21 states.